Top 7 things to think about when considering a charity collaboration or merger
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Considering the potential benefits of increased collaboration with other organisations, and reviewing the effectiveness of existing collaborations, should be a top priority for the charity trustee roles and senior management.
Some of the key legal do's and don'ts when considering collaboration include:
1. Keep control
It is up to each charity involved to decide how 'deeply' they wish to collaborate. Consider the extent of any commitment, and which aspects of the operation you may wish to keep outside of a collaboration.
2. Reputation is key
Doing your due diligence on potential collaboration partners is important, especially where the collaboration will create potential risks for your organisation.
3. Think about structure early on
There are a wide range of potential ways of structuring a collaboration, ranging from;
- informal joint working arrangements which may not even be legally binding.
- more formal.
- binding contractual arrangements.
- joint ventures establishing a separate legal entity for the collaboration.
- full mergers, which themselves can be structured in a variety of ways.
Each collaboration structure has its own legal, financial and operational implications. Early advice from lawyers and accountants can be very valuable to ensuring a collaboration is structured appropriately and avoids unwanted tax and VAT consequences.
4. Maintain independence and guard against 'mission drift' at all times
It is vital that any proposed collaboration falls within your organisation's charitable objectives to avoid any potential breach of trust implications for trustees. Collaborations shouldn't result in a loss of a charity's independence, unless a full merger is being contemplated, and the charity governance arrangements for any collaboration should reflect this.
5. Collaboration doesn't have to mean merger
We often hear that 'there are too many charities', and whilst there will be cases where a merger is best, it is not always the right solution. There is a wide range of collaboration structures that fall short of merger but can still create significant benefits and impact. There is also a lot to be said for maintaining as much diversity and choice among sector organisations as possible.
6. Establishing and building mutual trust and confidence is essential to an effective collaboration
It is often best to start small and build trust with new collaboration partner organisations before embarking on deeper collaborations.
7. Document the arrangement properly
Even the most informal collaborations should be documented to provide clarity on the nature of the relationship being created. But for more formal collaborations a well drafted collaboration agreement will be vital to underpin the arrangement and protect your organisation. Such an agreement should deal with matters such as:
- The expected commitment and contributions of each organisation;
- How liabilities will be shared;
- Governance and decision-making arrangements;
- Confidentiality and>Charities lawyers can help, contact them today, or visit their hub page.